Sunday, September 21, 2008

The Washington Post's Ruth Marcus weighs in on the Obama campaign's ads on Social Security. The short story:

There is a fair argument to be had about the wisdom of having workers invest part of their Social Security taxes in private accounts. This year's plunge buttresses the contention that such accounts are too risky to comprise even part of what was conceived, after all, to serve as a safety net. But Obama's cartoon version of private accounts is not what Bush suggested, and it certainly is not something being peddled by McCain now.

In the closing weeks of a campaign when every advantage counts it's hard for either side to hold back. Understandable given what's at stake, but it doesn't make it easier to get things done afterwards.

4 comments:

Anonymous
said...

Ruth Marcus doesn't know much about Social Security. The fact that she has joined the chorus neither makes us smarter nor particularly informs the debate.

It's just name calling.

Andrew, could you explain how the Obama campaign MIGHT HAVE arrived at a "cut benefits in half" assertion? I am sure that you could produce an argument that uses their assumptions to arrive at their number.

You might also add where you think the assumptions are incorrect or distortions to probable outcomes, but I am sure that YOU could provide an informed commentary about where the numbers come from. The lack of explanation of the calculation and other pundits crying FALSE seems to be the reason behind Ruth joining calling the assertion a whopper.

The fact that Obama camp didn't get back to her in the heat of the campaign - that's proof?

By using two different assumptions and altering the time you're referencing, you can produce pretty much any number you want. Apparently the Obama folks were referencing proposals for full 'price indexing' of future benefits. That would reduce benefits by around 1 percent per year. So pick the percentage you want, then cite retirees that number of years from now (roughly). The problem is, neither President Bush nor Sen. McCain have favored full price indexing, so you can't accurately attribute it to them.

Bush has favored partial or 'progressive' price indexing, which would produce that level of reductions only for people who earned above the tax max ($102k) every year of their life, so it's around 1/10th of a percent of people. So you can do it there if you cite only the very rich (Dean Baker has done this) but that's also not exactly accurate.

A third way is to include the 'offset' against traditional benefits for people who choose accounts. This further reduction is designed to equalize treatment of account holders and non-account holders. Add that offset to the reduction for solvency and you can get a pretty high number.

But all this is pretty much game playing unless you have an actual plan to help the system pay the promised benefits you claim are being cut. Obama's plan isn't nearly enough to do that.

I went and read the Furman paper (the above average wage is pretty low). Will this be adjusted by CPI all-urban or by CPI weekly-wages under the "progressive indexing" proposal?

Progressive indexing is a misnomer because by 2075 the political will to have SS as welfare will be about zero; this is exactly opposite what any progressive would want as it will kill off SS.

How do you square your statements about "What McCain supports" with his statement that the current system and transfer payments from current revenues is obscenely wrong?

Given that he doesn't think the current program should have the current funding source guaranteed, isn't it a bit over the top to insist that Obama is wrong to suggest full promised benefits as the comparator. Under a McCain plan with no transfer payments (he meant it, right?) there is *no* funding stream.

I think a 1 percent difference between wage growth and proposed CPI adjustment is a reasonable and history based estimate -- not a lie and not really much of a stretch.

As I understood McCain's (admittedly poorly phrased) statement, he was talking about how in a paygo system that simply transfers between workers and retirees, changing demographics means that younger workers won't get nearly as good a deal out of the system as today's retirees. All of this is 100% foreseeable, but for two decades Congress has failed to act. While the phrasing was terrible, in substance that's what he was condemning. There's no reason to believe McCain thinks the entire program is obscene.

About me

I am a Resident Scholar at the American Enterprise Institute in Washington, where my work focuses on Social Security policy. Previously I held several positions within the Social Security Administration, including Deputy Commissioner for Policy and principal Deputy Commissioner. Prior to that I was a Social Security Analyst at the Cato Institute. In 2005 I worked on Social Security reform at the White House National Economic Council, and in 2001 I was on the staff of the President's Commission to Strengthen Social Security. My Bachelor's degree is from the Queen's University of Belfast, Northern Ireland. I have Master's degrees from Cambridge University and the University of London and a Ph.D. from the London School of Economics and Political Science. I can be contacted at andrew.biggs @ aei.org.